Comprehensive Annual Financial Report

Transcription

1 Marion County, Oregon Comprehensive Annual Financial Report Fiscal Years Ended June 30, 2015 and 2014

2 SALEM AREA MASS TRANSIT DISTRICT Comprehensive Annual Financial Report For the years ended June 30, 2015 and 2014 Marion County, Oregon Prepared by the Finance Department Jared Isaksen, Finance Manager Wendy Feth, Accountant

3 Table of Contents For the Years Ended June 30, 2015 and 2014 INTRODUCTORY SECTION Page Letter of Transmittal...i Organizational Chart... vi Board of Directors...vii Certificate of Achievement for Excellence Award... viii FINANCIAL SECTION Independent Auditor s Report...2 Management s Discussion and Analysis...5 Basic Financial Statements Statements of Net Position Statements of Revenues, Expenses and Changes in Net Position Statements of Cash Flows Notes to the Basic Financial Statements Required Supplementary Information Schedule of Changes in the Net Pension Liability and Related Ratios, Non-Bargaining Schedule of Employer Contributions Defined Benefit Plan Non-Bargaining Schedule of Changes in the Net Pension Liability and Related Ratios, Bargaining Schedule of Employer Contributions Defined Benefit Plan Bargaining Schedule of OPEB Funding Progress Supplementary Information Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual: General Fund Capital Improvement Fund Special Transportation Fund Reconciliation of Net Change in Fund Balance on a Non-GAAP Budgetary Basis to Changes in Net Position on a GAAP Basis Schedule of Revenues, Expenditures and Changes in Fund Balance Capital Improvement Projects on a Non-GAAP Budget Basis Schedule of Revenues, Expenditures and Changes in Fund Balance Special Transportation Programs on a Non-GAAP Budget Basis Schedule of Property Tax Transactions and Outstanding Balances STATISTICAL SECTION Financial Trends Summary of Net Position Last Ten Fiscal Years Schedule of Changes in Net Position Last Ten Fiscal Years... 66

4 Table of Contents For the Years Ended June 30, 2015 and 2014 Revenue Capacity Information Assessed Value and Estimated Actual Value of Taxable Property Principal Property Taxpayers Property Tax Levies and Collections Demographic and Economic Information Demographic and Economic Statistics Salem Metropolitan Area Employers Operating Information District Employees by Division Operating Revenue and Cost Measurements DISCLOSURES AND COMMENTS REQUIRED BY STATE MINIMUM STANDARDS Independent Auditor s Report Required by Oregon State Regulations... 83

5 Introductory Section

6 SALEM-KEIZER TRANSIT 555 Court St. NE, Suite 5230 Salem, OR Fax January 20, 2016 Board of Directors 555 Court St. NE, Suite 5230 Salem, OR It is our pleasure to submit to you the Comprehensive Annual Financial Report of the Salem Area Mass Transit District for the fiscal year ended June 30, Oregon Statutes require that the District publish, within six months of the close of each fiscal year, a complete set of financial statements presented in conformance with accounting principles generally accepted in the United States of America and audited in accordance with auditing standards generally accepted in the United States of America by a firm of licensed certified public accountants. The District has received an extension for this year s report. This report consists of management's representations concerning the finances of the District. Consequently, responsibility for the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with management. To provide a reasonable basis for making these representations, management has established an internal control structure designed to safeguard District assets against loss, theft, or misappropriation, and to ensure the reliability of financial records for preparing financial statements in conformity with generally accepted accounting principles (GAAP). The internal control structure has been designed to provide reasonable, but not absolute, assurance that these objectives are being met. The concept of reasonable assurance recognizes that (1) the cost of the control structure should not exceed the benefits likely to be derived; and (2) the evaluation of cost and benefits requires estimates and judgments by management. We believe that the District's internal control structure adequately safeguards assets and provides reasonable assurance of proper recording of financial transactions. To the best of our knowledge and belief, the enclosed data is presented accurately, in all material respects, along with disclosures necessary to provide the reader with a reasonable understanding of the District's financial affairs. This report was prepared in accordance with the Governmental Accounting Standards Board (GASB) and includes: A narrative introduction, overview, and analysis of the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The District's MD&A can be found following the independent auditor's report on the basic financial statements, beginning on page 5 of this report. Statement of Net Position, Statement of Revenues, Expenses and Changes in Net Position, Statement of Cash Flows and related notes for the District as a whole on the full accrual basis. Schedule of Revenues, Expenses, and Changes in Fund Balance - Budget to Actual is presented as supplementary information. i

7 Grove, Mueller & Swank, P.C., a firm of licensed certified public accountants, audited the District's financial statements. The goal of this independent audit was to provide reasonable assurance that the financial statements of the District for the fiscal year ended June 30, 2015, are free of material misstatements. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the District's basic financial statements for the fiscal year ended June 30, 2015, are fairly presented in all material respects in conformity with GAAP. The independent auditor's report is presented in the Financial Section of this report beginning on page 2. In addition to meeting the requirements set forth above, the independent audit was also designed to meet the special needs of federal grantor agencies as provided for in the Federal Single Audit Act and the Office of Management and Budget's (OMB) Circular A-133. These standards require the independent government's internal controls to be established and maintained effectively and the District to be in compliance with legal requirements, with special emphasis on internal controls and compliance with legal requirements involving the administration of federal awards. The results of the independent audit for the fiscal year ended June 30, 2015 indicated no significant violations of applicable laws and regulations. The independent auditor's reports, related specifically to the Single Audit and OMB Circular A-133, are contained in a separate report. District Overview Salem-Keizer Transit, officially known as the (District) provides public transportation services to the Salem and Keizer communities, as well as to many communities throughout Oregon s mid-willamette Valley. The District was established in 1979, under the laws of the State of Oregon that allowed for the formation of transit districts as special taxing entities. Prior to that time, Cherriots, the District s fixed route bus system, had been part of the City of Salem. The District is governed by a seven member elected Board of Directors, elected at-large from within the District's boundaries. The Board of Directors sets District policy, levies taxes, appropriates funds, adopts budgets, and performs other duties required by state and federal laws. The daily management of the District is under the supervision of the General Manager, who is appointed by the Board of Directors. For financial planning and control, the District prepares and adopts an annual budget in accordance with Oregon Revised Statutes Chapters through The legally adopted budget is at the fund/object level for current expenditures, with separate appropriations established for the object levels of personnel services, materials and services, capital outlay, and internal transfers for each fund. Budgetary control is internally administered at a more restrictive level. Budget-to-actual comparisons for each individual fund for which an appropriated annual budget has been adopted are provided as other supplementary information in this report. The District provides effective and efficient solutions to the community's transportation needs and advocates for policies and programs that promote a high quality of life, clean air, transportation, efficient land use, and the effective use of resources. ii

8 The District is committed to the successful implementation of total fixed-route accessibility and the successful operation of a demand-response/para-transit service for persons unable to use the fixed route system. All of the District's fixed-route buses are ADA accessible. Local Economy The District is located within the Salem Metropolitan Statistical Area (MSA). The Salem MSA, as defined by the United States Census Bureau, is an area consisting of two counties in western Oregon, Marion and Polk. The principal city is Salem, which has a population of 160,614. As of the 2013 census, there were 399,945 people living in the Salem MSA compared with a population of 391,395 in the 2010 census. Marion and Polk Counties are located south of the Portland metropolitan area in the center of the Willamette Valley. The District s boundaries are contiguous with the urban growth boundaries and include the City of Salem and the City of Keizer. The District also provides rural services to Marion and Polk Counties and commuter services to Wilsonville and the Spirit Mountain Casino in Grand Ronde, Oregon. The City of Salem is the capitol of Oregon and the county seat for Marion County. Salem is the third largest city and Keizer is the fourteenth largest city in Oregon. The major industries in the Salem MSA are agribusiness, health care, and technology. The area s economy also has a substantial government and education base. State agencies located in Marion County provide employment to approximately 19,000 people. The seasonally adjusted unemployment in the Salem MSA in September 2015 was 6.7 percent, 0.5 percentage points higher than the September 2014 rate but still lower than the September 2013 rate of 8.4 percent. The recovery from the recession has been slow. Salem s economy lost nearly 12,000 jobs during the last recession, 8 percent of total jobs, from 2007 to the trough of the recession in November of While growth has returned, and is picking up, the median county has regained just half of its recessionary losses. Many of the state s smaller and generally Southern and/or Eastern counties have regained one-third or less of their losses. The Salem area is now growing faster than Portland area according to the Oregon Office of Economic Analysis. The Oregon Office of Economic states that Bend and Salem are currently adding jobs today about as fast as they ever have. Fixed Route Transportation Over 11 million passenger miles are traveled annually, with total ridership of 3,371,517 for fiscal year This total ridership represents an increase of 1.5 percent from the fiscal year This increase is minor when compared to the 20 percent decrease experienced by the District during the fiscal year For fiscal year 2015 the operating costs, on a budgetary basis, per revenue mile for the fixed route service amounted to $10.08 compared to a cost of $10.16 for fiscal year 2014 or (a 0.8 percent decrease), while the average cost per ride increased from $6.12 in fiscal year 2014 to $6.15 for fiscal year 2015 (a 0.5 percent increase). The increase in the cost per ride is minor and within expectations as the same level of service was provided between FY 2014 and Alternative Transportation Ridership in the para-transit, non-emergency medical transportation, dial-a-ride, and shopper shuttle programs increased during fiscal year The total rides provided in fiscal year 2015 were 581,184 compared to 528,610 rides provided in fiscal year The average cost of providing demand response iii

9 rides in fiscal year 2015 was $28.86 compared with $25.94 for fiscal year This increase in cost per ride is due to an increase in the number of rides provided, especially in rides that are ungrouped during a trip. A small portion of the cost of providing these alternative transportation services is covered with fare revenue, 2.4 percent for the fiscal year 2015 compared with 2.8 percent for fiscal year Funding from federal and state sources provided 95.7 percent of fiscal year 2015 program operating costs, and 90.7 percent of fiscal year 2014 program operating costs. Grant funding eliminated the net program costs to the District in fiscal year Major Initiatives The District establishes an annual list of strategic priorities. For fiscal year 2015 highlights of the strategic priorities include the introduction of the West Salem Connector pilot project, Bus Stop Improvement Project, site selection of the South Salem Transit Center. Future Our vision is to make a positive difference by enhancing community livability through innovative, sustainable regional transportation options. In the next three years, work towards this vision will be focused on the implementation of the District s Moving Forward service plan. Phase I of this plan was implemented in September Succeeding phases will be implemented upon acquiring a new sustainable revenue source. Major capital improvements anticipated in the upcoming fiscal year include the continuation of the Bus Stop Improvement Project, construction of a signalized intersection at the Keizer Transit Center, and preliminary design and engineering for the South Salem transit center. Long-term Financial Planning While the District has maintained the current level of service for the last six years there is a great need in the community for weekend service. The District asked voters to approve a local option levy or a payroll tax in November 2015 election but was unsuccessful. The additional funds would have provided resources to expand services to include weekend, evening and holiday service enhancements. The District is now working at the State level to seek out a sustainable funding source for transit operations. Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the District for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, This was the third year that the District received this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized CAFR. This report must satisfy both generally accepted accounting principles (GAAP) and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement Program s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. iv

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11 Board of Directors General Manager (2) Community Relations (1) Strategic Planning Public Relations Administration (15) Operations (150) Transportation Development (13) Human Resources Finance Safety & Risk Management Marketing Communication Fixed Route Service Vehicle and Facilities Maintenance Security Contracted Transportation Mobility Management Customer Service Planning Information Technology Rideshare/Transportation Demand Management Capital Projects vi

12 BOARD OF DIRECTORS Term Board Subdistrict Expiration Steve Evans, Treasurer 1 - West Salem June 30, 2015 Brad Coy 2 - Keizer June 30, 2017 Kate Tarter, Secretary 3 - North Salem June 30, 2015 John Hammill 4 - Northeast Salem June 30, 2017 Jerry Thompson, President 5 - Southeast Salem June 30, 2015 Robert Krebs, Vice-President 6 - South Salem June 30, 2017 Marcia Kelley 7 - South Salem June 30, 2015 General Manager Allan Pollock vii

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14 Financial Section 1

15 475 Cottage Street NE, Suite 200, Salem, Oregon (503) INDEPENDENT AUDITOR S REPORT Board of Directors Salem Area Mass Transit Salem, Oregon Report on the Financial Statements We have audited the statements of net position, statements of revenue, expenses and changes in net position, and cash flows of Salem Area Mass Transit (the District) as of and for the years ended June 30, 2015 and 2014, and the related notes to the financial statements, which collectively comprise the District s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the District s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 2

16 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of, as of June 30, 2015 and 2014, and the respective changes in financial position, and cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in notes to the financial statements, the District adopted the accounting requirements of Governmental Accounting Standards Board Statements No. 68, Accounting and Financial Reporting for Pensions, and No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date as of July 1, 2014, which resulted in the restatement of the financial statements for the year ended June 30, Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis (MD&A) (pages 5 through 9), schedule of changes in net pension liability and related ratios non-bargaining (page 43), schedule of employer contributions defined benefit plan non-bargaining (pages 44 and 45), schedule of changes in net pension liability and related ratios bargaining (page 47), schedule of employer contributions defined benefit plan - bargaining (pages 48 and 49), and schedule of OPEB funding progress (page 50) be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the MD&A and other schedules described above in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District s basic financial statements. The other supplementary information, introductory section and statistical section, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The other supplementary information is the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, 3

17 the other supplementary information is fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards and Other Legal and Regulatory Requirements Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 20, 2016, on our consideration of the District s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District s internal control over financial reporting and compliance. Report on Other Legal and Regulatory Requirements In accordance with Minimum Standards for Audits of Oregon Municipal Corporations, we have issued our report dated January 20, 2016, on our consideration of the District s compliance with certain provisions of laws and regulations, including the provisions of Oregon Revised Statutes as specified in Oregon Administrative Rules. The purpose of that report is to describe the scope of our testing of compliance and the results of that testing and not to provide an opinion on compliance. GROVE, MUELLER & SWANK, P.C. CERTIFIED PUBLIC ACCOUNTANTS By: Ryan T. Pasquarella, A Shareholder January 20,

18 s Management s Discussion and Analysis The management of (District) presents this narrative overview and analysis to facilitate both a short-term and long-term analysis of the financial activities of the District for the fiscal years ended June 30, 2015 and This Management s Discussion and Analysis (MD&A) is based on facts, decisions, and conditions that existed as of the date of the independent auditor s report. Overview of the Financial Statements The District s financial statements consist of a statement of net position, a statement of revenues, expenses and changes in net position, and a statement of cash flows. They have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (GAAP). Under this basis of accounting, revenues are recognized in the period in which they are earned, and expenses are recognized in the period in which they are incurred, regardless of the related cash flows. Financial Highlights In fiscal year (FY) 2015, The District adopted GASB Statements No. 68 and 71. These statements established new accounting and reporting rules related to pension plans that, most notably, include presenting the net pension liability and deferred inflows and outflows related to pensions on the statement of net position. There are also a number of changes to the notes to the financial statements and required supplementary information. Implementation of these statements required the restatement of FY 2014 financial statements to maintain comparability between the two years presented in this report. The District's total assets increased in FY 2015 from $57 million to $59.6 million, due to an increase in federal grants receivables and cash balances. The District's total assets decreased in FY 2014 from $58.5 million to $57 million, due to a decrease in federal grants receivables. The District s deferred outflows increased in FY 2015 by approximately $784,000 due to the adoption of GASB Statements No. 68 and 71. The District did not have any deferred outflows in FY The District s total liabilities decreased in FY 2015 by $.6 million, due mostly to a decrease in the net pension liability and accounts payable from restricted assets. The District s total liabilities, as restated, increased in FY 2014 by $3.6 million, due to the adoption of new GASB statements recording the net pension liability on the Statement of Net Position. In FY 2015, the District s deferred inflows decreased by approximately $170,000 from $676,000 to $507,000. These amounts were part of the adoption of new GASB statements. In FY 2015, the District s total net position increased by $4.2 million. The investment in capital assets decreased by approximately $2.0 million, or 5.6 percent mainly due to the yearly depreciation and the unrestricted net position increased by approximately $5.8 million. In FY 2014, the District s total net position, as restated, decreased by $5.7 million. The beginning net position was restated by $8.9 million as a result of the retroactive implementation of a new 5

19 accounting standard, GASB Statement No. 68, Accounting and Financial Reporting for Pensions, under which the net pension liability for each of the District s pension plans is now recorded on the face of the Statement of the Net Position. In FY 2014, the investment in capital assets increased by approximately $2.5 million, or 7.2 percent, the restricted net position increased by $127,570, and the unrestricted net position decreased by approximately $8.4 million. Unrestricted net position was reduced as a result of the adoption of new GASB statements. In FY 2015, operating revenue increased more than $1.1 million from $6.4 million to $7.5 million, or 18 percent, from the prior year. This increase was due to increased ridership in the Non-Emergent Medical Transportation (DMAP/WVCH) program. Non-operating revenues, including capital contributions, increased approximately $4 million from the prior year. This increase is due to an increase in non-operating revenues from federal grants and state programs. Operating expenses increased more than $4.1 million from the prior year. The majority of the increase is from an increase in eligible DMAP/WVCH participants and contracted transportation costs associated with that increase. In FY 2014, operating revenue decreased more than $203,000 from $6.5 million to $6.3 million, or 3.1 percent, from the prior year. This decrease was due to Lamar Advertising cancelling their contract with the District in early FY Non-operating revenues, including capital contributions, decreased approximately $915,000 from the prior year. This decrease is due to a decrease in non-operating revenues from federal grants and from grants for capital acquisition. Operating expenses increased more than $3.2 million from the prior year. The majority of the increase is from an 18% increase in eligible Non-Emergency Medical Transportation (DMAP) participants and contracted transportation costs associated with that increase. The remainder of the increase is due to filling budgeted positions and an increased number of operators. The District s major transfers were from the general fund to the capital project fund for $102,000 and $1.8 million and to the special transportation fund for $0 and $975,000 for the fiscal years ended June 30, 2015 and 2014 respectively. 6

20 June 30, Assets (As Restated) Current and restricted assets $ 24,911,083 $ 20,148,979 $ 24,153,129 Capital assets, net of depreciation 34,772,770 36,855,141 34,371,636 Total assets 59,683,853 57,004,120 58,524,765 Deferred outflows of resources 784, Total assets and deferred outflows of resources 60,468,643 57,004,120 58,524,765 Liabilities Current liabilities 3,488,792 3,717,897 6,078,400 Noncurrent liabilities 7,451,813 7,826,851 1,904,030 Total liabilities 10,940,605 11,544,748 7,982,430 Deferred inflows of resources 506, ,936 - Net position Investment in capital assets 34,772,770 36,855,141 34,371,636 Restricted for capital projects 3,707,543 4,017,170 3,952,823 Restricted for special transportation 2,249,540 1,038, ,514 Unrestricted 8,291,233 2,872,388 11,242,362 Total net position 49,021,086 44,783,436 50,542,335 Total liabilities, deferred inflows of resources and net position $ 60,468,643 $ 57,004,120 $ 58,524,765 Net position invested in capital assets consists of land, land improvements, buildings, vehicles, and office and shop equipment, net of accumulated depreciation. Net position restricted for capital projects and special transportation programs represents amounts restricted for use for special transportation programs, projects, and capital expenditures. 7

21 Year Ended June 30, Operating revenues (As Restated) Passenger fares $ 2,817,514 $ 2,776,575 $ 2,793,604 Accessible services and medicaid 4,305,757 3,129,220 3,127,234 Other revenues 365, , ,937 Non-operating revenues Property taxes 10,714,350 10,179,017 9,984,733 State assistance 6,350,961 5,746,114 5,251,979 Federal assistance 18,721,493 11,786,100 12,538,020 Other revenues 125,940 55,316 79,672 Total revenue 43,401,073 34,137,394 34,429,179 Operating expenses (39,808,053) (35,684,127) (35,595,418) Extraordinary gain/(loss) - - 3,842,554 Capital contributions 644,630 4,691,727 5,519,348 Changes in net position 4,237,650 3,144,994 8,195,663 Beginning net position 44,783,436 50,542,335 42,346,672 Cumulative effect of restatement - (8,903,893) - Beginning net position (restated) - 41,638,442 - Ending net position $ 49,021,086 $ 44,783,436 $ 50,542,335 The District s total revenue increased more than $9.2 million, or 27.1 percent, during FY The District s total revenue decreased more than $290,000, or 0.85 percent, during FY Capital Assets The District s investment in capital assets amounts to $34.7 million and $36.8 million net of accumulated depreciation as of June 30, 2015 and 2014 respectively. This investment in capital assets includes land, construction in progress, buildings, land improvements, revenue rolling stock, and equipment. The total decrease in the District s investment in capital assets for FY 2015 was 5.7 percent. The total increase in the District s investment in capital assets for FY 2014 was 7.2 percent. Major capital projects during FY 2015 included the Stops and Shelters project as well as the purchase of CherryLift vehicles. Construction in progress at the end of the year was approximately $1 million for various projects. Major capital projects during FY 2014 included the remediation of Courthouse Square. Construction in progress at the end of the year was $685,523 for various projects. 8

22 June 30, Increase/(decrease) Land $ 2,050,691 $ 2,050,691 $ 2,050,691 $ - $ - Construction in progress 1,072, ,523 4,308, ,665 (3,623,391) Buildings 19,413,087 19,850,285 11,520,160 (437,198) 8,330,125 Land improvements 3,359,769 3,454,594 3,573,889 (94,825) (119,295) Revenue rolling stock 7,687,429 9,488,924 11,777,007 (1,801,495) (2,288,083) Equipment 1,189,606 1,325,124 1,140,975 (135,518) 184,149 $ 34,772,770 $ 36,855,141 $ 34,371,636 $ (2,082,371) $ 2,483,505 Additional information on the District s capital assets can be found in note 5 on pages of this report. Request for Information This financial report is designed to provide a general overview of the District s finances for those with an interest in the District s finances. Questions concerning any of the information provided in this report, or requests for additional information should be addressed to: 555 Court Street NE, Suite 5230 Salem, Oregon

23 Basic Financial Statements 10

24 NO CONTENT APPEARS ON THIS PAGE BY DESIGN 11

25 Statements of Net Position June 30, 2015 and Assets Current assets Unrestricted cash and cash equivalents 11,871, (As restated) $ $ 7,631,563 Accounts receivable 205, ,792 Property taxes receivable 596, ,274 Prepaid expenses 196, ,859 Inventories 637, ,056 Restricted cash and cash equivalents 2,471,124 - Federal grants receivable 6,402,865 5,559,318 State grants receivable 2,529,086 5,187,117 Total current assets 24,911,083 20,148,979 Capital assets Land 2,050,691 2,050,691 Land improvements (net of depreciation) 3,359,769 3,454,594 Buildings and improvements (net of depreciation) 19,413,087 19,850,285 Buses and equipment (net of depreciation) 8,877,035 10,814,048 Construction in progress 1,072, ,523 Total capital assets 34,772,770 36,855,141 Total assets 59,683,853 57,004,120 Deferred outflows of resources Deferred outflows - Non-bargaining 219,656 - Deferred outflows - Bargaining 565,134 - Total deferred outflows of resources 784,790 - Total assets and deferred outflows of resources $ 60,468,643 $ 57,004,120 The accompanying notes are an integral part of the financial statements. 12

26 (As restated) Liabilities Current liabilities Accounts payable $ 426,138 $ 371,691 Accounts payable from restricted assets 1,154,369 1,527,627 Payroll, withholdings and payroll taxes 697, ,570 Construction retainage 12,003 12,003 Due to other governments from restricted assets 83,788 32,923 Accrued vacation and sick leave 1,115,157 1,154,083 Total current liabilities 3,488,792 3,717,897 Noncurrent liabilities Net pension liability - Non-bargaining 1,233,214 1,589,868 Net pension liability - Bargaining 3,713,820 3,951,953 Net OPEB obligation 2,504,779 2,285,030 Total noncurrent liabilities 7,451,813 7,826,851 Total liabilities 10,940,605 11,544,748 Deferred inflows of resources Deferred inflows - Non-bargaining 141, ,711 Deferred inflows - Bargaining 365, ,225 Total deferred outflows of resources 506, ,936 Net position Investment in capital assets 34,772,770 36,855,141 Restricted for capital projects 3,707,543 4,017,170 Restricted for special transportation 2,249,540 1,038,737 Unrestricted 8,291,233 2,872,388 Total net position 49,021,086 44,783,436 Total liabilities, deferred inflows of resources and net position $ 60,468,643 $ 57,004,120 The accompanying notes are an integral part of the financial statements. 13

27 Statements of Revenues, Expenses and Changes In Net Position For the Fiscal Years Ended June 30, 2015 and (As restated) Operating revenues Passenger fares $ 2,817,514 $ 2,776,575 Accessible services and medicaid 4,305,757 3,129,220 Other revenues 365, ,052 Total operating revenues 7,488,329 6,370,847 Operating expenses Personnel services 16,204,737 13,960,216 Materials and services 16,407,550 14,486,383 Accessible services and special transportation 3,886,694 3,824,460 Depreciation 3,089,323 3,032,068 OPEB expense 219, ,000 Total operating expenses 39,808,053 35,684,127 Operating loss (32,319,724) (29,313,280) Non-operating revenues Property taxes 10,714,350 10,179,017 State assistance 6,350,961 5,746,114 Federal assistance 18,721,493 11,786,100 Earnings on investments 94,776 53,457 Insurance settlement 22,557 - Gain on disposal of capital assets 8,607 1,859 Total non-operating revenues 35,912,744 27,766,547 Change in net position before extraordinary items and capital contributions 3,593,020 (1,546,733) Capital contributions Federal and state grants for capital acquisition 644,630 4,691,727 Changes in net position 4,237,650 3,144,994 Total net position - beginning of year 44,783,436 41,638,442 Total net position - end of year $ 49,021,086 $ 44,783,436 The accompanying notes are an integral part of the financial statements. 14

28 Statements of Cash Flows For the Fiscal Years Ended June 30, 2015 and (As restated) Cash flows from operating activities Cash received from customers $ 7,520,023 $ 6,379,052 Payments to employees for services (17,714,457) (18,549,006) Cash paid to suppliers for good and services (20,573,600) (18,633,663) Net cash used for operating activities (30,768,034) (30,803,617) Cash flows from noncapital financing activities Receipts from property taxes 10,777,993 10,267,512 Receipts from state assistance 12,559,857 5,309,468 Receipts from federal assistance 18,258,181 18,622,262 Net cash provided by noncapital financing activities 41,596,031 34,199,242 Cash flows from capital and related financing activities Receipts from capital grants (3,235,605) 1,669,133 Receipts from litigation/insurance recoveries 22,557 - Acquisition and construction of capital assets (1,006,952) (5,701,789) Sale of capital assets 8,607 1,859 Net cash provided (used) for capital and related financing activities (4,211,393) (4,030,797) Cash flows from investing activities Interest received 94,776 53,457 Net change in cash and cash equivalents 6,711,380 (581,715) Cash and cash equivalents, July 1 7,631,563 8,213,278 Cash and cash equivalents, June 30 $ 14,342,943 $ 7,631,563 Reconciliation of operating loss to net cash used for operating activities Operating loss $ (32,319,724) $ (29,313,280) Adjustments to reconcile operating loss to net cash used for operating activities: Depreciation 3,089,323 3,032,068 Decrease in net pension liability and related deferrals (1,548,561) (2,686,136) OPEB expense 219, ,000 (Increase) decrease in accounts receivable 31,694 8,205 (Increase) decrease in prepaid expenses (4,846) 19,970 (Increase) decrease in inventories 44,301 (58,113) Increase (decrease) in accounts payable 54,447 32,123 Increase (decrease) in accounts payable from restricted assets (373,258) (316,800) Increase (decrease) in payroll, withholdings and payroll taxes 77,767 (1,971,266) Increase (decrease) in accrued vacation and sick leave (38,926) 68,612 Net cash used for operating activities $ (30,768,034) $ (30,803,617) Noncash Investing, Capital, and Financing Activities Noncash portion of capital contributions $ - $ - The accompanying notes are an integral part of the financial statements. 15

29 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 (1) Summary of Significant Accounting Policies The financial statements of the (District) have been prepared in accordance with Generally Accepted Accounting Principles (GAAP) as applied to government units in the United States of America. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the District s accounting policies are described below. A. Financial Reporting Entity Accounting principles generally accepted in the United States of America require that the reporting entity include the primary government, all organizations for which the primary government is financially accountable and other organizations that, by the nature and significance of their relationship with the primary government, would cause the financial statements to be incomplete or misleading if excluded. Based on these criteria, the District is considered a primary government and does not have any component unit relationships. Conversely, the District is not considered a component unit of any primary government. B. Organization and Operation The District was organized under the provisions of Oregon Revised Statutes (ORS) Chapter 267 to provide mass transit services to the Salem/Marion County area. Formation of the District was effective in Under ORS 267, the District is authorized to levy taxes and charge fares to pay for the operations of the District. The District is also authorized to issue general obligation bonds and revenue bonds. The District is governed by an elected seven-member Board of Directors. Board members represent and must live in certain geographical sub-districts. The Board of Directors sets District policy, levies taxes, appropriates funds, adopts budgets, and performs other duties required by state and federal law. C. Basis of Accounting and Revenue Recognition The District is reported as a single proprietary unit. Proprietary reporting is used to account for operations and activities that are similar to those found in the private sector. The financial statements have been prepared using the economic resources measurement focus and accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Under this basis, revenues are recognized in the period in which they are earned and expenses are recognized in the period in which they are incurred, regardless of the timing of related cash flows. Operating revenues consist primarily of passenger fares and funds received for special transportation. Operating expenses include the costs of operating the District, including depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. 16

30 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 Revenues are recognized when they are earned and available to meet current obligations. Expenses are recognized when they are incurred. The District applies a flow of economic resources measurement focus, whereby all assets and liabilities associated with the operation of the District are included on the Statement of Net Position. Ad valorem property taxes are levied and become a lien on all taxable property as of July 1. Property taxes are payable on November 15. Collection dates are November 15, February 15, and May 15. Discounts are allowed if the amount due is received by November 15. Taxes unpaid and outstanding on May 16 are considered delinquent. Uncollected taxes are deemed to be substantially collectible or recoverable through liens; therefore, no allowance for uncollectible taxes has been established. Federal and state grant contributions for capital acquisitions are recorded as capital contributions and are included in net income when earned. Federal and state grant receipts relating to operating expenses are recorded as non-operating revenue when earned. D. Restricted Assets Restricted assets consist of assets restricted for federal capital grant programs and State of Oregon special transportation programs. When both restricted and unrestricted resources are available for use, it is the District s policy to use restricted resources first and then unrestricted resources as they are needed. E. Cash and Investments ORS authorizes the District to invest in obligations of the U.S. Treasury and agencies, time certificates of deposit, bankers acceptances, repurchase agreements, certain types of corporate bonds, and the State of Oregon Local Government Investment Pool. Such investments are stated at cost. The investments are increased by accretion of discounts and reduced by amortization of premiums, which are computed by the straightline method and approximates fair market value. Fair value is defined as the amount at which an investment could be exchanged between willing parties, other than in a forced or liquidation sale. For purposes of the statement of cash flows, the District considers cash and equivalents to include all highly liquid debt instruments with an original maturity of three months or less. F. Inventories Inventories of fuel, lubricants, parts, and supplies are valued at cost, which approximates market, using the average cost method. 17

31 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 G. Prepaid Expenses Payments to vendors reflecting costs applicable to future accounting periods are recorded as prepaid expenses. H. Capital Assets Capital assets are stated at cost, except for donated capital assets, which are stated at the fair market value on the date of donation. Expenditures for additions and improvements with a value in excess of $5,000 and a useful life of more than one year are capitalized. Expenditures for maintenance, repairs, and minor improvements are charged to operations as incurred. Upon disposal of capital assets, the accounts are relieved of the related costs and accumulated depreciation, and the resulting gains or losses are reflected in the statement of revenues, expenses, and changes in net position. Capital assets, excluding land and construction in progress, are depreciated using the straight-line method over the estimated useful lives of the assets. Depreciation is an accounting process to allocate the cost of capital assets to expense in a systematic and rational manner to those periods expected to benefit from the use of capital assets. Depreciation is not intended to represent an estimate in the decline of fair market value, nor are capital assets net of accumulated depreciation, intended to represent an estimate of the current condition, of the assets or the maintenance requirements needed to maintain the assets at their current level of condition. Asset Years Buildings, Shelters, Stations Revenue Rolling Stock 5 12 Equipment 3 10 Monthly depreciation is taken in the year the assets are acquired or retired. Gains or losses from sales or retirements of capital assets are included in operations of the current period. I. Vacation and Sick Pay Vacation pay is vested when earned. Employees earn annual leave based on length of service to the District. Unpaid vested vacation is shown as vested compensated absences on the Statement of Net Position and recorded as an expense when earned. Sick pay is accrued on a bi-weekly basis. Payouts are either 50 percent or 20 percent of the balance depending on the accrued hours and length of service. Sick pay is recorded as a liability on the statement of net position and an expense as accrued. 18

32 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 J. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. K. Net Position Net position comprises the various net earnings from operations, non-operating revenues, expenses and contributions of capital. Net position is classified in the following three categories. Investment in capital assets consists of all capital assets, net of accumulated depreciation and reduced by outstanding debt that is attributable to the acquisition, construction and improvement of those assets, if any. Restricted consists of external constraints placed on net position use by creditors, grantors, contributors, or laws or regulations of other governments or constraints imposed by law through constitutional provisions or enabling legislation. Unrestricted consists of all other net position that is not included in the other categories previously mentioned. L. Deferred Inflows and Outflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until then. M. New Pronouncements During FY 2014, the District implemented the following GASB pronouncements: GASB Statement No. 66, Technical Corrections 2012 An Amendment of GASB Statement 10 and No. 62. The objective of this Statement is to improve accounting and financial reporting for a governmental financial reporting entity by resolving conflicting guidance that resulted from the issuance of two pronouncements, Statements 19

33 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, and No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre- November 30, 1989 FASB and AICPA Pronouncements. The District has determined that this statement has no significant impact on the District s financial statements. GASB Statement No. 67, Financial Reporting of Pension Plans an Amendment of GASB No. 25. The objective of the statement is to improve financial reporting by state and local governmental pension plans. The statement is effective for reporting periods after June 15, The District has determined that this statement has no significant impact on the District s financial statements. GASB Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees. The objective of the statement is to improve accounting and financial reporting by state and local governments that extend and receive nonexchange financial guarantees. The statement is effective for reporting periods beginning after June 15, The District has determined that this statement has no significant impact on the District s financial statements. During FY 2015, the District implemented the following GASB pronouncements: GASB Statement No. 68, Accounting and Financial Reporting for Pensions an Amendment of GASB No. 27. The objective of the statement is to improve accounting and financial reporting by state and local governments for pensions. The statement is effective for reporting periods beginning after June 15, The District has implemented this standard. GASB Statement No. 69, Government Combinations and Disposals of Government Operations. This statement establishes accounting and financial reporting standards related to government combinations and disposals of government operations. The statement is effective for government combinations and disposals of government operations occurring in financial reporting periods beginning after December 15, The District has determined that this statement has no significant impact on the District s financial statements. GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date; an amendment of GASB No. 68. The provisions of this Statement are required to be applied simultaneously with the provisions of Statement No. 68. The requirements of this Statement are effective for financial statements for fiscal years beginning after June 15, (2) Stewardship, Compliance, and Accountability For budgeting purposes, the District consists of a general fund, capital improvement fund, and special transportation fund. This is in conformity with Oregon Budget Law. Budgetary basis revenues and expenditures are recognized on the modified accrual basis. The treatment 20

34 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 of capital expenditures is the principal difference between the budgetary basis and the accrual basis. Capital expenditures on a budgetary basis are recorded as current expenditures. Financial operations of the District are accounted for in the following budgetary funds: General Fund The fund accounts for all financial resources and expenditures related to the District s general operations, except those required to be accounted for in another fund. The principal revenue sources are property taxes, state payroll assessments, passenger fares and federal operating assistance. Capital Improvement Fund This fund accounts for major capital acquisitions and projects. The principal revenue sources are capital grants from the Federal Transit Administration and transfers from the General Fund. Special Transportation Fund This fund accounts for expenditures related to transportation service to special public groups. The fund s principal sources of revenue are Federal grants and reimbursements, State special transportation formula grants and transfers from the General Fund. The General Manager submits a proposed operating and capital budget to the Budget Committee a sufficient length of time in advance to allow adoption of the budget prior to July 1. The operating and capital budget includes proposed expenditures and the means of financing them. Public hearings are conducted to obtain taxpayer comments. The District legally adopts its annual budget prior to July 1 through passage of a resolution. The resolution authorizes appropriations by fund and at broad classification levels for personal services, materials and services, capital outlay, and contingency. Expenditures cannot legally exceed appropriations at these control levels. Appropriations that have not been spent at year-end expire. The Board of Directors, by resolution, may amend the budget as originally adopted. One amendment totaling approximately $1.25 million was made to the budget during the year ended June 30, The Special Transportation Fund had over-expenditures for materials and services of $448,105. (3) Cash and Cash Equivalents The District maintains a cash and investment pool that is available for use by all funds, except for restricted cash and investments. At June 30, 2015 and 2014 the carrying value of 21

35 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 cash and investments and fair value are approximately equal. At June 30, 2015 and 2014, cash and investments included in cash and cash equivalents consisted of: Cash Cash on hand $ 16,676 $ 32,951 Deposits with financial institutions 591, ,680 Investments Local government investment pool 13,734,733 7,245,932 Total cash and investments $ 14,342,943 $ 7,631,563 Unrestricted cash and investments $ 11,871,819 $ 8,592,387 Restricted cash and investments 2,471,124 (960,824) Total cash and investments $ 14,342,943 $ 7,631,563 A. Deposits As of June 30, 2015 and 2014, the book balance of the District s bank deposits (checking accounts) was $591,534 and $352,680 and the bank balance was $1,230,012 and $537,698 respectively. The difference is due to transactions in process. B. Custodial Risk Deposits This is the risk that in the event of a bank failure, the District s deposits may not be returned. Effective July 1, 2008, the State of Oregon formed the Oregon Public Funds Collateralization Program under ORS 295. The collateralization program creates a statewide pool of qualified bank depositories for local governments, providing collateralization for bank balances that exceed the limits of federal depository insurance, and eliminating the need for certificates of participation. As of June 30, 2015 and 2014, none of the District s bank balances were exposed to credit risk. C. Investments The State Treasurer of the State of Oregon maintains the Oregon Short-term Fund, of which the Local Government Investment Pool (LGIP) is part. Participation by local governments is voluntary. The State of Oregon investment policies are governed by statute and the Oregon Investment Council. In accordance with Oregon Statutes, the investment funds are invested as a prudent investor would do, exercising reasonable care, skill and caution. The Oregon Short-term Fund is the LGIP for local governments and was 22

36 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 established by the State Treasurer. It was created to meet the financial and administrative responsibilities of federal arbitrage regulations. At June 30, 2015 and 2014, the fair value of the District s position in the LGIP was approximately equal to the value of the pool shares. The investment in the Oregon Shortterm Fund is not subject to risk evaluation. Separate financial statements for the Oregon Short-term Fund are available from the Oregon State Treasurer. D. Interest Rate Risk - Investments In accordance with its investment policy, the District manages its exposure to declines in fair value of its investments by limiting the maximum maturity of its investments to one year or less. E. Custodial Risk - Investments For an investment, there is the risk that, in the event of a failure of the counterparty, the District will not be able to recover the value of its investments or collateralized securities that are in the possession of an outside party. Currently the District s investments are limited to the LGIP. F. Credit Risk - Investments The LGIP is administered by the Oregon State Treasury with the advice of other state agencies and is not registered with the U.S. Securities and Exchange Commission. The LGIP is an open-ended, no-load, diversified portfolio offered to any agency, political subdivision, or public corporation of the state that by law is made the custodian of, or has control of any fund. The LGIP is commingled with the State's short-term funds. In seeking to best serve local governments of Oregon, the Oregon Legislature established the Oregon Short-term Fund Board, which has established diversification percentages and specifies the types and maturities of the investments. The purpose of the Board is to advise the Oregon State Treasury in the management and investment of the LGIP. These investments within the LGIP must be invested and managed as a prudent investor would, exercising reasonable care, skill and caution. Professional standards indicate that the investments in external investment pools are not subject to custodial risk because they are not evidenced by securities that exist in physical or book entry form. Nevertheless, management does not believe that there is any substantial custodial risk related to investments in the LGIP. The LGIP is not rated for credit risk. 23

37 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 (4) Restricted Assets Restricted assets are restricted for capital outlay and special transportation. Total Restricted Assets Less Current Liabilities Payable Net Restricted Assets (Liabilities) 2015 Restricted for capital Cash and investments $ 2,888,219 $ (304,882) $ 2,583,337 Federal grants receivable 1,124,206-1,124,206 Total restricted for operating capital 4,012,425 (304,882) 3,707,543 Restricted for special transportation Cash and investments (417,095) (990,427) (1,407,522) Federal grants receivable 2,545,454-2,545,454 State grants receivable 1,111,608-1,111,608 Total restricted for special transportation 3,239,967 (990,427) 2,249,540 $ 7,252,392 $ (1,295,309) $ 5,957, Restricted for capital Cash and investments $ (68,753) $ (158,048) $ (226,801) Federal grants receivable 743, ,971 State grants receivable 3,500,000-3,500,000 Total restricted for operating capital 4,175,218 (158,048) 4,017,170 Restricted for special transportation Cash and investments (892,071) (1,476,678) (2,368,749) Federal grants receivable 3,015,716-3,015,716 State grants receivable 391, ,770 Total restricted for special transportation 2,515,415 (1,476,678) 1,038,737 $ 6,690,663 $ (1,634,726) $ 5,055,907 24

38 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 (5) Capital Assets The changes in capital assets for the year ended June 30, 2015 are summarized below: Beginning Impairment/ Ending Balance Additions Deletions Adjustments Balance Capital assets, non-depreciable: Land $ 2,050,691 $ - $ - $ - $ 2,050,691 Construction in progress 685, ,071 - (214,406) 1,072,188 Total capital assets, non-depreciable 2,736, ,071 - (214,406) 3,122,879 Capital assets, depreciable: Buildings 25,248, , ,399,333 Land improvements 3,578,860 24, ,603,608 Revenue rolling stock 26,923, ,937 (286,664) 214,406 27,028,081 Equipment 5,145,288 53, ,198,930 Total capital assets, depreciable 60,896, ,881 (286,664) 214,406 61,229,952 Less accumulated depreciation: Buildings (5,398,494) (587,752) - - (5,986,246) Land improvements (124,266) (119,573) - - (243,839) Revenue rolling stock (17,434,478) (2,192,838) 286,664 - (19,340,652) Equipment (3,820,164) (189,160) - - (4,009,324) Total accumulated depreciation (26,777,402) (3,089,323) 286,664 - (29,580,061) Net depreciable capital assets 34,118,927 (2,683,442) - 214,406 31,649,891 Net capital assets $ 36,855,141 $ (2,082,371) $ - $ - $ 34,772,770 The changes in capital assets for the year ended June 30, 2014 are summarized below: Beginning Impairment/ Balance Additions Deletions Adjustments Ending Balance Capital assets, non-depreciable: Land $ 2,050,691 $ - $ - $ - $ 2,050,691 Construction in progress 4,308, ,743 - (4,072,134) 685,523 Total capital assets, non-depreciable 6,359, ,743 - (4,072,134) 2,736,214 Capital assets, depreciable: Buildings 16,501,439 4,869,693-3,877,647 25,248,779 Land improvements 3,578, ,578,860 Revenue rolling stock 27,080,183 58,350 (215,131) - 26,923,402 Equipment 5,117, ,787 (305,357) 194,487 5,145,288 Total capital assets, depreciable 52,277,853 5,066,830 (520,488) 4,072,134 60,896,329 Less accumulated depreciation: Buildings (4,981,279) (417,215) - - (5,398,494) Land improvements (4,971) (119,295) - - (124,266) Revenue rolling stock (15,303,176) (2,346,433) 215,131 - (17,434,478) Equipment (3,976,396) (149,125) 305,357 - (3,820,164) Total accumulated depreciation (24,265,822) (3,032,068) 520,488 - (26,777,402) Net depreciable capital assets 28,012,031 2,034,762-4,072,134 34,118,927 Net capital assets $ 34,371,636 $ 2,483,505 $ - $ - $ 36,855,141 25

39 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 The federal government retains a reversionary interest in property and equipment to the extent of capital grants provided for their purchase. Upon disposal of property and equipment, a prorated share of proceeds in excess of $5,000, if any, is returned to the federal governments. (6) Employee Retirement Plans The District provides retirement benefits to its employees through two defined benefit plans, a defined contribution plan and a deferred compensation plan. A. Defined Benefit Plans The District contributes to two single-employer defined benefit pension plans. The Salem Area Mass Transit Non-bargaining plan (Non-bargaining) covers all nonunion employees. The Salem Area Mass Transit-Bargaining plan (Bargaining) covers all union employees. Each plan s assets are held in trust, independent of the District, and solely for the purpose of paying each plan s benefits and administrative expenses. The assets are invested in a variety of stocks, bonds, and other securities. Neither plan includes in its assets, any District securities or securities of any related parties. No loans have been granted to the District from plan funds. Plan Description In a defined benefit plan, benefits are determined using benefit formulas which take into account actuarial information. The plans were effective January 1, 2002 and are administered by Pioneer Trust. No separate financial statements are available for these plans. The District s Board of Directors holds the authority for establishing and amending plan benefits and funding policies for both defined benefit plans. Benefits Provided The defined benefit plans provide pension benefits to eligible full-time bargaining and nonbargaining employees. Regular career status employees who have successfully completed the probationary period of six months or 1,000 hours of service, whichever is later, are eligible to participate. The District makes all contributions to the plan. The District s contributions for each employee (and investment earnings allocated to the employee s account) are fully vested after five years of service. District contributions for, and investment earnings forfeited by, employees who leave employment before five years of service, are used to reduce the District s contribution requirements. The benefit payable at a participant s normal retirement date will be equal to the excess of 1.64 percent times the participant's final average salary times the participant s benefit credits for the non-bargaining employees or 1.64 percent for the bargaining unit employees over the amount which is the actuarial equivalent of the participant s account balance in the plan as of termination of employment. 26

40 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 Non-Bargaining Plan Employees Covered by Benefit Terms The following employees were covered by the benefit terms as of the most recent actuarial valuation: Inactive employees or beneficiaries currently receiving benefits 27 Inactive employees entitled to but not yet receiving benefits 7 Active employees Contributions The District is in the process of establishing a formal funding policy with the Board of Directors. The Board of Directors has the authority to establish or amend such policies. Currently, the District s contribution rates are actuarially determined and approved and implemented by executive staff. Contributions to the plan are made quarterly according to an actuarially determined rate recommended by an independent actuary. This rate is intended to finance the cost of current benefits earned, plus an amount to finance the unfunded accrued liability. This rate, expressed as a percentage of covered payroll was, percent and percent for the years ended June 30, 2015 and 2014, respectively. The District makes additional level dollar contribution to further reduce the unfunded accrued liability. For the years ended June 30, 2015 and 2014, that amount was $50,645 and $604,852, respectively. Net Pension Liability The District s net pension liability for the non-bargaining plan at June 30, 2015, was measured as of that date, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of July 1, The District s net pension liability for the non-bargaining plan at June 30, 2014 was measured as of that date, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of July 1, Actuarial Methods and Assumptions The total pension liability in the July 1, 2013, actuarial valuation was determined using the following actuarial assumptions applied to all periods included in the measurement: Inflation rate: 3% Salary increases: 8.25% for first 5.5 years of service; 4.00% thereafter Investment rate of return, net: 6.75% Mortality: RP-2000 Combined Healthy Mortality Table projected to 2015 per Scale AA The non-bargaining pension plan does not provide for automatic, post-retirement benefit increases. No ad hoc increases have been adopted. 27

41 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 The best-estimate range for the long-term expected rate of return is determined by adding expected inflation to expected long-term real returns and reflecting expected volatility and correlation. The capital market assumptions are per Milliman s investment consulting practice as of June 30, 2013: Long-Term Expected Arithmetic Asset Class Target Allocation Real Rate of Return Cash 1.82% 0.50% Core Fixed Income 30.88% 2.20% Non-U.S. Fixed Income 16.83% 1.32% Broad U.S. Equities 27.40% 6.12% Mid Cap U.S. Equities 5.93% 6.63% Small Cap U.S. Equities 2.97% 7.64% Developed Foreign Equities 3.79% 6.29% Emerging Market Equities 5.84% 8.94% Real Estate (REITS) 4.54% 5.59% % Long-Term Expected Rate of Return 6.75% Rate of Return For the years ended June 30, 2015 and 2014, respectively, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was 1.47 percent and percent. The money-weighted return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested. Discount rate The discount rate is used to measure the total pension liability was 6.75 percent as of June 30, 2015 and The projection of cash flows used to determine the discount rate assumed that employer contributions will be made at rates equal to the current contribution rate. The actuarially determined contribution rate is based on a closed amortization period, which means that payment of the actuarially determined contribution each year will bring the plan to a 100% funded position by the end of the amortization period. Plan assets are assumed to earn the assumed rate of return and there are no future changes in the plan provisions or actuarial methods and assumptions. Based on those assumptions, the pension plan s fiduciary net position was projected to be available to make all projected future benefit payments to current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 28

42 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 Changes in Net Pension Liability Increase (Decrease) Total Pension Liability Plan Fiduciary Net Position Net Pension Liability Balance at 6/30/14 $ 6,662,590 $ 5,072,722 $ 1,589,868 Changes for the year: Service cost 67,782-67,782 Interest on total pension liability 436, ,793 Benefit payments (527,340) (527,340) - Employer contributions - 450,685 (450,685) ICMA transfers - 334,156 (334,156) Net investment income - 76,388 (76,388) Balance at 6/30/15 $ 6,639,825 $ 5,406,611 $ 1,233,214 Increase (Decrease) Total Pension Liability Plan Fiduciary Net Position Net Pension Liability Balance at 6/30/13 $ 6,652,319 $ 3,863,409 $ 2,788,910 Changes for the year: Service cost 63,496-63,496 Interest on total pension liability 437, ,042 Benefit payments (490,267) (490,267) - Employer contributions - 1,069,000 (1,069,000) ICMA transfers - 111,013 (111,013) Net investment income - 519,567 (519,567) Balance at 6/30/14 $ 6,662,590 $ 5,072,722 $ 1,589,868 Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the District, calculated using a discount rate of 6.75 percent, as well as what the District s net pension liability would be if it were calculated using a discount rate of one percentage point lower or one percentage point higher that the rate used: Net Pension Liability % decrease (5.75%) $ 1,769,368 $ 2,147,014 Current discount rate (6.75%) 1,233,214 1,589,868 1% increase (7.75%) 675,364 1,021,154 29

43 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 Pension Plan Fiduciary Net Position Detailed information about the pension plan s fiduciary net position can be obtained by writing to: Salem-Keizer Transit, 555 Court St NE Suite 5230, Salem, OR Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the years ended June 30, 2015 and 2014, The District recognized pension expense of $(278,123) and $(657,050), respectively. The District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources at June 30, 2015: Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Bargaining Plan Deferred Inflow of Resources Deferred Outflows of Resources Net difference between projected and actual earnings $ (141,533) $ 219,656 Year ended June 30: 2016 $ 7, , , , Thereafter - Employees Covered by Benefit Terms The following employees were covered by the benefit terms as of the most recent actuarial valuation: Inactive employees or beneficiaries currently receiving benefits 57 Inactive employees entitled to but not yet receiving benefits 15 Active employees Contributions The District is in the process of establishing a formal funding policy with the Board of Directors. The Board of Directors has the authority to establish or amend such policies. Currently, the District s contribution rates are actuarially determined and approved and 30

44 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 implemented by the executive staff. Contributions to the plan are made quarterly according to an actuarially determined rate recommended by an independent actuary. This rate is intended to finance the cost of current benefits earned, plus an amount to finance the unfunded accrued liability. This rate, expressed as a percentage of covered payroll was, percent and percent for the years ended June 30, 2015 and 2014, respectively. The District makes additional level dollar contribution to further reduce the unfunded accrued liability. For the years ended June 30, 2015 and 2014, that amount was $0 and $959,392, respectively. Net Pension Liability The District s net pension liability for the non-bargaining plan at June 30, 2015, was measured as of that date, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of July 1, The District s net pension liability for the non-bargaining plan at June 30, 2014 was measured as of that date, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of July 1, Actuarial Methods and Assumptions The total pension liability in the July 1, 2013, actuarial valuation was determined using the following actuarial assumptions applied to all periods included in the measurement: Inflation rate: 3% Salary increases: 8.25% for first 5.5 years of service; 4.00% thereafter Investment rate of return, net: 6.75% Mortality: RP-2000 Combined Healthy Mortality Table projected to 2015 per Scale AA The non-bargaining pension plan does not provide for automatic, post-retirement benefit increases. No ad hoc increases have ever been adopted. The best-estimate range for the long-term expected rate of return is determined by adding expected inflation to expected long-term real returns and reflecting expected volatility and correlation. The capital market assumptions are per Milliman s investment consulting practice as of June 30, 2013: 31

45 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 Long-Term Expected Arithmetic Asset Class Target Allocation Real Rate of Return Cash 1.82% 0.50% Core Fixed Income 30.88% 2.20% Non-U.S. Fixed Income 16.83% 1.32% Broad U.S. Equities 27.40% 6.12% Mid Cap U.S. Equities 5.93% 6.63% Small Cap U.S. Equities 2.97% 7.64% Developed Foreign Equities 3.79% 6.29% Emerging Market Equities 5.84% 8.94% Real Estate (REITS) 4.54% 5.59% % Long-Term Expected Rate of Return 6.75% Rate of Return For the years ended June 30, 2015 and 2014, respectively, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was 1.50 percent and percent. The money-weighted return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested. Discount rate The discount rate is used to measure the total pension liability was 6.75 percent as of June 30, 2015 and The projection of cash flows used to determine the discount rate assumed that employer contributions will be made at rates equal to the current contribution rate. The actuarially determined contribution rate is based on a closed amortization period, which means that payment of the actuarially determined contribution each year will bring the plan to a 100% funded position by the end of the amortization period. Plan assets are assumed to earn the assumed rate of return and there are no future changes in the plan provisions or actuarial methods and assumptions. Based on those assumptions, the pension plan s fiduciary net position was projected to be available to make all projected future benefit payments to current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 32

46 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 Changes in Net Pension Liability Increase (Decrease) Total Pension Liability Plan Fiduciary Net Position Net Pension Liability Balance at 6/30/14 $ 16,945,345 $ 12,993,392 $ 3,951,953 Changes for the year: Service cost 571, ,573 Interest on total pension liability 1,157,908-1,157,908 Benefit payments (737,506) (737,506) - Employer contributions - 1,374,052 (1,374,052) ICMA transfers - 388,882 (388,882) Net investment income - 204,680 (204,680) Balance at 6/30/15 $ 17,937,320 $ 14,223,500 $ 3,713,820 Increase (Decrease) Total Pension Liability Plan Fiduciary Net Position Net Pension Liability Balance at 6/30/13 $ 15,884,678 $ 9,769,695 $ 6,114,983 Changes for the year: Service cost 535, ,431 Interest on total pension liability 1,089,620-1,089,620 Benefit payments (564,384) (564,384) - Employer contributions - 2,362,838 (2,362,838) ICMA transfers - 93,932 (93,932) Net investment income - 1,331,311 (1,331,311) Balance at 6/30/14 $ 16,945,345 $ 12,993,392 $ 3,951,953 Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the District, calculated using a discount rate of 6.75 percent, as well as what the District s net pension liability would be if it were calculated using a discount rate of one percentage point lower or one percentage point higher that the rate used: Net Pension Liability % decrease (5.75%) $ 5,711,083 $ 5,884,464 Current discount rate (6.75%) 3,713,819 3,951,953 1% increase (7.75%) 1,950,213 2,253,428 33

47 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 Pension Plan Fiduciary Net Position Detailed information about the pension plan s fiduciary net position can be obtained by writing to: Salem-Keizer Transit, 555 Court St NE Suite 5230, Salem, OR Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the years ended June 30, 2015 and 2014, the District recognized pension expense of $136,383 and $(627,438), respectively. The District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources at June 30, 2015: Deferred Inflow of Resources Net difference between projected and actual earnings (365,419) Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: B. Defined Contribution Plan Deferred Outflows of Resources $ $ 565,134 Year ended June 30: 2016 $ 19, , , , Thereafter - Plan Description The District provides pension benefits through a defined contribution pension plan. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. The plan is administered by ICMA. The District s Board of Directors holds the authority for establishing and amending plan provisions and contribution requirements for the defined contribution plan. Benefits Provided The defined contribution plan provides pension benefits to eligible full-time nonbargaining employees. Regular career status employees who have successfully completed the probationary period of six months or 1,000 hours of service, whichever is later, are eligible to participate. Contributions The District makes all contributions to the plan. The District s contributions for each 34

48 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 employee (and investment earnings allocated to the employee s account) are fully vested after five years of service. District contributions for, and investment earnings forfeited by, employees who leave employment before five years of service, are used to reduce the District s contribution requirements. The contribution rate is 10 percent of employee s gross salary for non-bargaining unit employees. For the years ended June 30, 2015 and 2014, employer contributions recognized as expense were $349,004 and $319,336, respectively. (7) Post Employment Benefits Other than Pensions A. Plan Description The District administers a single-employer defined benefit healthcare plan per the requirements of collective bargaining agreements. The plan provides an explicit employer benefit of up to the cost per month per pre-medicare retiree toward postretirement healthcare insurance for eligible retirees, and at cost for retiree spouses, through the District s group health insurance plans, which cover both active and retired participants. The level of benefits provided by the plan are the same as those afforded to active employees. This level of coverage is provided to retirees until they become eligible for Medicare, typically age 65. The District s post-retirement healthcare plan was established in accordance with ORS ORS stipulate that for the purpose of establishing healthcare premiums, the rate must be based on all plan members, including both active employees and retirees and their spouses. The difference between retiree claim costs (which because of the effect of age is generally higher in comparison to all plan members) and the amount of retiree healthcare premiums represents the District s implicit employer contribution. The District has not established a trust fund to supplement the costs for the net other postemployment benefit (OPEB) obligation. No standalone financial report is generated for the plan. B. Funding Policy The District collects insurance premiums, net of applied explicit benefits, from all retirees each month. The District then pays health insurance premiums for all retirees at the blended rate for each family classification. The required contribution to the plan included the employer s pay-as-you-go amount, an amount paid by retirees and an additional amount calculated to prefund future benefits as determined by the actuary. The District has elected to not pre-fund the actuarially determined future cost. The amount paid by the District for retirees, and eligible retiree spouses, healthcare for the years ended June 30, 2015 and 2014 was $127,643 and $77,625 respectively. C. Annual OPEB Cost and Net OPEB Obligation The District s annual OPEB cost is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the guidelines of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded 35

49 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 actuarial liabilities over a period not to exceed thirty years. The following table shows the components of the District s annual OPEB cost for the fiscal year ending June 30, 2015, the amount actually contributed to the plan, and changes in the District s net OPEB obligation: * 2013* Annual required contribution $ 541,272 $ 601,000 $ 601,000 Interest earned on net OPEB obligation 79,976 40,000 40,000 Adjustment to the annual required contribution (163,067) (50,000) (50,000) Annual OPEB cost 458, , ,000 Estimated benefit payments 238, , ,000 Increase in Net OPEB obligation 219, , ,000 Beginning net OPEB obligation 2,285,030 1,904,030 1,523,030 Ending net OPEB obligation $ 2,504,779 $ 2,285,030 $ 1,904,030 *Amounts estimated as actuarial valuation was not complete by date of report. The District s percentage of annual OPEB cost contributed to the plan for fiscal years ending June 30, 2015, 2014, and 2013 was 51 percent, 36 percent, and 36 percent, respectively. D. Funding Status Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and the new estimates are made about the future. The funded status of the plan at June 30, 2015, based on the July 1, 2013 actuarial valuation is as follows: Actuarial value of assets $ - Actuarial accrued liability 3,681,355 Unfunded actuarial accrued liability (UAAL) 3,681,355 Funded ratio 0% Covered payroll 10,327,935 UAAL as a percentage of covered payroll 36% The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about 36

50 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. E. Actuarial Methods and Assumptions Projection of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of shortterm volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. The July 1, 2013 actuarial valuation used the projected unit credit cost method, an assumed 3.5 percent rate of return, and a healthcare cost inflation trend of 15.5 percent premiums for fiscal year 2013, 5.8 percent after the second year, 5.5 percent after the third and fourth years, 5.6 percent for the fifth through eleventh years, and slowly increasing to an ultimate rate of 5.9 percent in 2042 and beyond. The general inflation rate is assumed to be 2.75 percent per year. Retirement and withdrawal rates are the same as those used by the District in the actuarial valuations of retirement benefits. The discount rate is selected based on the expected long-term annual investment returns for Oregon s Local Government Investment Pool and comparable investment vehicles. The unfunded actuarially accrued liability is amortized as a level percent of payroll over 15 years on a rolling basis. (8) Interfund Transfers Interfund transfers for the year ended June 30, 2015 consisted of the following: Transfers to: Transfers from: Transfers are used to (1) use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations and (2) use unrestricted reserve funds. (9) Risk Management General Capital Projects $ 102,842 The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The District purchases commercial insurance to minimize its exposure to these risks. Settled claims have not exceeded this commercial coverage in any of the past three years. 37

51 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 (10) Reclassification Certain amounts in prior-year financial statements have been reclassified for comparative purposes to conform to presentation in the current-year financial statements. (11) Commitments and Contingencies Under the terms of federal and state grants, periodic audits are required and costs may be questioned as not being appropriate under the terms of the grants. Such audits could lead to reimbursement to the grantor agencies. District management believes disallowance, if any, will be immaterial. As of June 30, 2015, the District also had commitment of approximately $151,900 for architectural work related to the South Salem Transit Center. The District has a long-term lease agreement for storage space. During the year ended June 30, 2014 the District vacated the office space that was being rented while the Courthouse Square building and transit mall were being remediated. Rent for the office space for the fiscal year ended June 30, 2014 was $279,217. Rent for the storage space for fiscal years ended June 30, 2015 and 2014 was $3,798 and $3,726, respectively. Future obligations under the agreement are as follows: (12) Subsequent Events Fiscal Year Amount 2016 $ 3, ,852 Management has evaluated subsequent events through January 20, 2016 and is not aware of any other subsequent events that require recognition or disclosure in the financial statements. (13) Adoption of New Accounting Standard The GASB issued Statement No. 68, Accounting and Financial Reporting for Pensions in June The statement is required to be implemented for financial statements beginning after June 15, The District has implemented this standard for the current year and has retroactively applied the requirements to the prior year in order to retain comparability of the statements presented herein. Statement No. 68 introduces a number of changes related to pension accounting and reporting. A net pension liability and deferred inflows and outflows of resources related to pensions must now be reported on the face of the Statement of Net Position. The calculation of pension expense has also been prescribed. A number of new disclosures are included in the Notes to the Basic Financial Statements and additional schedules are included as Required Supplementary Information. 38

52 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 As a result of the adoption of Statement No. 68, the following changes were made to amounts previously reported as of June 30, 2014: Statement of Net Position As Originally Reported As Restated Effect of Change Current liabilities $ 4,149,053 $ 3,717,897 $ 431,156 Non-current liabilities Net pension liability - Non-bargaining - 1,589,868 (1,589,868) Net pension liability - Bargaining - 3,951,953 (3,951,953) Deferred inflows of resources Deferred inflows of resources - Non-bargaining - 188,711 (188,711) Deferred inflows of resources - Bargaining - 487,225 (487,225) Total effect of change (5,786,601) Beginning net position as of July 1, 2013, as originally reported 50,570,037 Beginning net position as of July 1, 2013, as restated $ 44,783,436 Statement of Revenues, Expenses and Changes in Net Position As Originally Reported As Restated Effect of Change Operating expenses Personnel services $ 17,077,508 $ 13,960,216 $ 3,117,292 Change in net position for the fiscal year ended June 30, 2014, as originally reported Changes in net position for the fiscal year ended June 30, 2014, as restated $ 27,702 3,144,994 (14) Future Pronouncements The District will implement new GASB pronouncements no later than the required fiscal year. Management has not determined the effect on the financial statements from implementing any of the pronouncements. GASB Statement No. 72, Fair Value Measurement and Application. This statement provides guidance for determining fair value measurements for financial reporting purposes. The statement is effective for fiscal years beginning after June 15,

53 Notes To The Basic Financial Statements For the Years Ended June 30, 2015 and 2014 GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. This statement supersedes Statement No. 45, establishing new accounting and financial reporting requirements for governments whose employees are provided with other postemployment benefits. This statement is effective for fiscal years beginning after June 15, GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, supersedes Statement No. 55, reducing the GAAP hierarchy to two categories of authoritative GAAP and addressing the use of non-authoritative literature. The statement is effective for fiscal years beginning after June 15,

54 Required Supplementary Information 41

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56 Schedule of Changes in the Net Pension Liability and Related Ratios For the Years Ended June 30, 2015 and 2014 Defined Benefit Pension Plan - Non-Bargaining (in 1,000s) Last 10 Fiscal Years 1 Fiscal Year ending June Total Pension Liability Service cost $ 68 $ 63 Interest on total pension liability Benefit payments (527) (490) Net change in total pension liability (22) 10 Total pension liability, beginning 6,663 6,652 Total pension liability, ending (a) $ 6,641 $ 6,662 Fiduciary Net Position Employer contributions $ 451 $ 1,069 ICMA transfers Investment income net of investment expenses Benefit payments (527) (490) Net change in plan fiduciary position 334 1,210 Fiduciary net position, beginning 5,073 3,863 Fiduciary net position, ending (b) $ 5,407 $ 5,073 Net pension liability, ending = (a)-(b) $ 1,234 $ 1,589 Fiduciary net position as a % of total pension liability 81.42% 76.15% Covered payroll $ 3,572 $ 3,684 Net pension liability as a % of covered payroll 34.55% 43.13% 1 This schedule is intended to show a 10-year trend of changes in the net pension liability. However, until a full 10-year trend is compiled, information will only be presented for those years in which it is available. 43

57 Schedule of Employer Contributions -Defined Benefit Plan - Non-bargaining Last 10 Fiscal Years Actuarially determined contribution $ 400,040 $ 464,148 $ 418,720 $ 544,976 Actual employer contribution 450,685 1,069, , ,025 Contribution deficiency(excess) $ (50,645) $ (604,852) $ (285,729) $ 228,951 Covered payroll $ 3,571,786 $ 3,683,712 $ 3,323,178 $ 3,707,321 Contribution as a % of covered payroll 12.62% 29.02% 21.20% 8.52% Notes to Schedule: Valuation date: 7/1/2013 Investment rate of return assumption: 6.75% Methods and assumptions used to determine contribution rates: Actuarial cost method: Entry age normal Amortization method: Level dollar Type of period: Open period Amortization period at 7/1/13: 12 years Amortization growth rate: 0.00% Asset valuation method: Market value Inflation: 3.00% Salary increases: 8.25% for first 5.5 year of service; 4.00% thereafter Investment rate of return: 6.75% Cost of living adjustments: None Turnover: Service based Mortality: RP-2000 Combined healthy morality with projection to 2015 per Scale AA 44

58 $ 511,342 $ 354,515 $ 360,588 $ 307,171 $ 152,184 $ 164, , , , , , ,064 $ 119,429 $ 26,138 $ 66,171 $ 36,518 $ (72,296) $ - $ 3,478,516 $ 3,313,227 $ 3,369,982 $ 3,530,703 $ 3,539,157 $ 3,815, % 9.91% 8.74% 7.67% 6.34% 4.30% 45

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60 Schedule of Changes in the Net Pension Liability and Related Ratios For the Years Ended June 30, 2015 and 2014 Defined Benefit Pension Plan - Bargaining (in 1,000s) Last 10 Fiscal Years 1 Fiscal Year ending June Total Pension Liability Service cost $ 572 $ 535 Interest on total pension liability 1,158 1,090 Benefit payments (738) (564) Net change in total pension liability 992 1,061 Total pension liability, beginning 16,945 15,885 Total pension liability, ending (a) $ 17,937 $ 16,946 Fiduciary Net Position Employer contributions $ 1,374 $ 2,363 ICMA transfers Investment income net of investment expenses 205 1,331 Benefit payments (738) (564) Net change in plan fiduciary position 1,230 3,224 Fiduciary net position, beginning 12,993 9,770 Fiduciary net position, ending (b) $ 14,223 $ 12,994 Net pension liability, ending = (a)-(b) $ 3,714 $ 3,952 Fiduciary net position as a % of total pension liability 79.29% 76.68% Covered payroll $ 5,633 $ 6,210 Net pension liability as a % of covered payroll 65.93% 63.64% 1 This schedule is intended to show a 10-year trend of changes in the net pension liability. However, until a full 10-year trend is compiled, information will only be presented for those years in which it is available. 47

61 Schedule of Employer Contributions -Defined Benefit Plan - Bargaining Last 10 Fiscal Years Actuarially determined contribution $ 1,385,691 $ 1,403,446 $ 1,310,605 Actual employer contribution 1,374,052 2,362,838 1,314,866 Contribution deficiency(excess) $ 11,639 $ (959,392) $ (4,261) Covered payroll $ 5,632,890 $ 6,209,939 $ 5,850,916 Contribution as a % of covered payroll 24.39% 38.05% 22.47% Notes to Schedule: Valuation date: 7/1/2013 Investment rate of return assumption: 6.75% Methods and assumptions used to determine contribution rates: Actuarial cost method: Entry age normal Amortization method: Level dollar Type of period: Open period Amortization period at 7/1/13: 12 years Amortization growth rate: 0.00% Asset valuation method: Market value Inflation: 3.00% Salary increases: 8.25% for first 5.5 year of service; 4.00% thereafter Investment rate of return: 6.75% Cost of living adjustments: None Turnover: Service based Mortality: RP-2000 Combined healthy morality with projection to 2015 per Scale AA 48

62 $ 1,336,104 $ 1,316,567 $ 1,176,679 $ 947,845 $ 845,719 $ 745,309 $ 755,685 1,352,215 1,172,427 1,138, , , , ,685 $ (16,111) $ 144,140 $ 38,602 $ 86,279 $ (82,985) $ 153,828 $ - $ 5,991,497 $ 5,903,889 $ 6,003,464 $ 5,924,033 $ 5,955,768 $ 5,962,469 $ 6,045, % 19.86% 18.96% 14.54% 15.59% 9.92% 12.50% 49

63 Schedule of OPEB Funding Progress Other Post-Employment Benefit (OPEB) Funding Progress Actuarial Valuation Date Actuarial Valuation of Assets Actuarial Accrued Liability (AAL) Unfunded Actuarial Accrued Liability (UAAL) Funded Ratio Annual Covered Payroll $ 0.00% 10,327,935 UAAL as a % of Covered Payroll 7/1/2013 $ - $ 3,681,355 3,681,355 $ 36% 7/1/2011-3,951,083 3,951, % 9,698,818 41% 7/1/2008-3,846,335 3,846, % 9,389,595 41% 50

64 Supplementary Information BUDGETARY COMPARISON SCHEDULES Pursuant to the provisions of Oregon Revised Statute, an individual schedule of revenues, expenditures, and changes in fund balances - budget and actual be displayed for each fund where legally adopted budgets are required. Enterprise Budgetary Comparison schedules include the following: - General Fund - Capital Project Fund - Special Transportation Fund 51

65 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual On A Non-GAAP Budgetary Basis - General Fund For the Fiscal Year Ended June 30, 2015 Budget Original Final Actual Variance Revenues Local revenue Passenger fares, passes & other fixed route services $ 2,835,640 $ 2,835,640 $ 2,701,909 $ (133,731) Property taxes 10,089,142 10,089,142 10,777, ,851 Courthouse square rentals 72,400 72,400 27,210 (45,190) Earnings on investments 40,000 40,000 94,776 54,776 Miscellaneous 26,000 26,000 59,720 33,720 Total local revenue 13,063,182 13,063,182 13,661, ,426 State revenue Energy tax credits 140, , , ,609 State in lieu taxes 4,800,000 4,800,000 5,395, ,588 Total state revenue 4,940,000 4,940,000 5,901, ,197 Federal revenue FTA urbanized area formula program (5307) 3,861,093 3,861,093 5,229,968 1,368,875 FTA metropolitan & statewide planning (5303) 133, , ,726 - Oregon health authority - medical assistance programs (DMAP) 64,000 64, , ,553 Total federal revenue 4,058,819 4,058,819 5,571,247 1,512,428 Total revenues 22,062,001 22,062,001 25,134,052 3,072,051 Expenditures Personnel services 18,140,690 18,140,690 16,532,584 1,608,106 Materials and services 5,525,608 5,525,608 4,401,288 1,124,320 Contingency 1,500,000 1,500,000-1,500,000 Total expenditures 25,166,298 25,166,298 20,933,872 4,232,426 Excess (deficiency) of revenues over expenditures (3,104,297) (3,104,297) 4,200,180 7,304,477 Other financing sources (uses) Transfers in from other funds 2,000 2,000 - (2,000) Transfer out to other funds (2,029,514) (2,029,514) (102,842) 1,926,672 Net change in fund balance (5,131,811) (5,131,811) 4,097,338 9,229,149 Fund balance, beginning of year 6,632,332 6,632,332 10,225,673 3,593,341 Fund balance, end of year $ 1,500,521 $ 1,500,521 $ 14,323,011 $ 12,822,490 52

66 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual on a Non-GAAP Budget Basis - Capital Improvement Fund For the Fiscal Year Ended June 30, 2015 Revenues Original Final Actual Variance State Revenue Special transportation fund program (ODOT) $ 72,000 $ 72,000 $ - $ (72,000) Federal revenue Urbanized area formula (Section 5307) 1,620,976 1,620,976 41,372 (1,579,604) FTA Job Access / Reverse Commute Programs (Section 3037) Formula Grants for Other than Urbanized Areas (5311) ,107 42,107 New freedom program (5317) 245, ,511 18,013 (227,498) Discretionary grants - section (5309) 2,797,581 2,797, ,308 (2,475,273) Federal Flex Funds 2,581,935 2,581, ,813 (2,361,122) Total federal revenue 7,246,003 7,246, ,630 (6,601,373) Other revenue Budget Insurance Settlement ,557 22,557 Total revenues 7,318,003 7,318, ,187 (6,650,816) Expenditures Personnel services 224, , , ,262 Materials and services 44,700 44,700 25,566 19,134 Capital outlay 6,163,634 6,163, ,437 5,210,197 Total expenditures 6,433,249 6,433,249 1,079,656 5,353,593 Excess (deficiency) of revenues over expenditures 884, ,754 (412,469) (12,004,409) Other financing sources (uses) Transfer from general fund 1,911,054 1,911, ,842 (1,808,212) Transfer from other funds 531, ,732 - (531,732) Total other financing sources (uses) 2,442,786 2,442, ,842 (2,339,944) Net change in fund balance 3,327,540 3,327,540 (309,627) (3,637,167) Fund balance, beginning of year 3,282,374 3,282,374 4,017, ,796 Fund balance, end of year $ 6,609,914 $ 6,609,914 $ 3,707,543 $ (2,902,371) 53

67 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual on a Non-GAAP Budget Basis - Special Transportation Fund For the Fiscal Year Ended June 30, 2015 Budget Original Final Actual Variance Revenues Local revenue Passenger fares $ 430,450 $ 430,450 $ 402,340 $ (28,110) State revenue Special transportation fund program (ODOT) 1,376,719 1,376,719 1,599, ,827 Federal revenue Oregon health plan - medical assistance programs (DMAP) 7,446,159 8,696,159 10,350,887 1,654,728 Developmental disabilities transportation services (DD53) 3,116,622 3,116,622 2,948,422 (168,200) Transportation for elderly persons and persons with disabilities (5310) 1,204,535 1,204,535 1,235,812 31,277 Formula grants for other than urbanized areas (5311) 331, , ,944 (42,106) Rideshare/TDM grant 388, , ,365 (16,098) Urbanized area formula (Section 5307) 1,309,657 1,309,657 1,109,791 (199,866) Total federal revenue 13,796,486 15,046,486 16,306,221 1,259,735 Total revenues 15,603,655 16,853,655 18,308,107 1,454,452 Expenditures Personnel services 1,347,481 1,347,481 1,120, ,929 Materials and services 14,222,801 15,472,801 15,920,906 (448,105) Total expenditures 15,570,282 16,820,282 17,041,458 (221,176) Excess (deficiency) of revenues over expenditures 33,373 33,373 1,266,649 1,675,628 Other financing sources (uses) Transfer from general fund 118, ,460 - (118,460) Transfer out to other funds (533,732) (533,732) - 533,732 Total other financing sources (uses) (415,272) (415,272) - 415,272 Net change in fund balance (381,899) (381,899) 1,266,649 1,648,548 Fund balance, beginning of year 763, ,104 1,096, ,702 Fund balance, end of year $ 381,205 $ 381,205 $ 2,363,455 $ 1,982,250 54

68 Reconciliation of Net Change in Fund Balance on a Non-GAAP Budgetary Basis to Changes in Net Position on a GAAP Basis For the Fiscal Year Ended June 30, 2015 Net change in fund balance: General fund $ 4,097,338 Capital improvement fund (309,627) Special transportation fund 1,266,649 Total change in fund balance 5,054,360 GAAP basis adjustments: Capitalized capital assets 1,006,952 Depreciation expense (3,089,323) Pension contributions in excess of pension expense 1,549,053 Property taxes accrual (63,643) OPEB liability adjustment (219,749) Change in net position $ 4,237,650 55

69 Schedule of Revenues, Expenditures and Changes in Fund Balance Capital Improvement Projects on a Non-GAAP Budget Basis For the Fiscal Year Ended June 30, 2015 Revenues Capital Project Administration Del Webb Facility Improvements ADA Assesment Center Cherriots Vehicles CherryLift Vehicles Non-Revenue Vehicles Federal revenue Urbanized area formula (Section 5307) $ - $ 23,665 $ - $ - $ - $ - FTA Job Access / Reverse Commute Programs (Section 3037) Formula Grants for Other than Urbanized Areas (5311) New freedom program (5317) - - 2, Discretionary grants - section (5309) ,865 - Federal Flex Funds Total federal revenue - 23,682 2, ,865 - Other revenue Insurance Settlement ,557 - Total revenues - 23,682 2, ,422 - Expenditures Personnel services 33,319 2, Materials and services 11,157 3, Capital outlay - 105,242 2, ,896 80,219 Total expenditures 44, ,516 2,883 1, ,896 80,219 Excess (deficiency) of revenues over expenditures (44,476) (86,834) (417) (1,182) (12,474) (80,219) Other financing sources (uses) Transfer from general fund 34,238 49, ,219 Net change in fund balance (10,238) (37,079) (417) (1,182) (12,474) (75,000) Fund balance, beginning of year 43, , ,268,920 97,893 75,000 Fund balance, end of year $ 32,978 $ 253,000 $ - $ 2,267,738 $ 85,419 $ - 56

70 Keizer Transit Center South Salem Transit Center Bus Stop Improvements CARTS Stop Improvements Call Center Phone Replacement Equipment Courthouse Square Improvements Furnishings Leased Space Improvements Total Capital Improvement Fund $ - $ - $ 17,707 $ - $ - $ - $ - $ - $ - $ 41, , , , ,013 20, , , , ,813 20, , ,520 42,107-15, , ,557 20, , ,520 42,107-15, ,187 13,742 6,763 41, , ,653 4, , ,566 14, , ,889 64,829 33,366 42,315 24,034 20,644 6, ,437 33, , ,098 65,810 36,113 42,315 24,034 21,549 6,345 1,079,656 (12,768) (9) (35,578) (23,703) (36,113) (26,768) (24,034) (21,549) (6,345) (412,469) 3, , ,842 (9,460) (9) (35,578) (23,703) (36,113) (26,768) (13,712) (21,549) (6,345) (309,627) 469,517 41, ,329 23,703 36, ,368 48,712 21,549 56,345 4,017,170 $ 460,057 $ 41,000 $ 353,751 $ - $ - $ 128,600 $ 35,000 $ - $ 50,000 $ 3,707,543 57

71 Schedule of Revenues, Expenditures and Changes in Fund Balance Special Transportation Programs on a Non-GAAP Budget Basis For the Fiscal Year Ended June 30, 2015 CherryLift RED LINE Revenues Local revenue Passenger fares $ 197,048 $ 12,509 State revenue Special transportation fund program (ODOT) 1,357,336 60,312 Federal revenue Oregon health plan - medical assistance programs (DMAP) - - Developmental disabilities transportation services (DD53) 2,948,422 - Transportation for elderly persons and persons with disabilities (5310) 309, ,571 Formula grants for other than urbanized areas (5311) - - Rideshare/TDM grant - - Urbanized area formula (Section 5307) 1,109,791 - Total federal revenue 4,368, ,571 Total revenues 5,922, ,392 Expenditures Personnel services 323,377 12,780 Materials and services Other materials and services 4,369, ,546 Call center allocation 190,666 33,066 Total expenditures 4,883, ,392 Net change in fund balance 1,038,960 - Fund balance, beginning of year 640,889 - Fund balance, end of year $ 1,679,849 $ - 58

72 CARTS DMAP/ WVCH TripLink Call Center Travel Training STF Coordination Rideshare TDM Grant Total Special Transportation Fund $ 192,783 $ - $ - $ - $ - $ - $ - $ 402, , , ,599,546-10,350, ,350, ,948, , , , ,235, , , , , , ,109, ,690 10,350, , , , ,885 16,306, ,473 10,350, , , , ,885 18,308, , ,929 45, ,168 20,015 90, ,543 1,120,552 1,150,362 8,667,110 1,080,001 39, ,132 90,740 83,343 15,920,906 31, ,166 (1,125,504) ,307,465 9,745, , , , ,886 17,041,458 (377,992) 605, ,266, , ,096,806 $ 77,925 $ 605,682 $ - $ - $ - $ - $ - $ 2,363,455 59

73 Schedule of Property Tax Transactions and Outstanding Balances For the Fiscal Year Ended June 30, 2015 Uncollected Uncollected Balance Discount & Balance Fiscal Year June 30, 2014 Levy Adjustments Collections June 30, $ - $ 10,882,259 $ (315,470) $ (10,279,838) $ 286, ,534 - (1,615) (174,831) 140, ,393 - (648) (78,565) 88, ,779-1,404 (63,076) 37, ,156-1,113 (26,365) 14, ,125 - (99) (3,825) 11, ,520 - (385) (1,582) 4,553 Prior years 15,767 - (1,155) (965) 13,647 Totals $ 660,274 $ 10,882,259 $ (316,855) $ (10,629,047) $ 596,631 60

74 Statistical Section This part of the District's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the District's overall financial health. Contents Financial Trend Information These schedules contain trend information to help the reader understand how the District's financial performance and well-being have changed over time. Revenue Capacity Information These schedules contain information to help the reader assess the factors affecting the District s ability to generate its most significant local revenue source, property taxes. Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the District's financial activities take place. Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the District's financial report relates to the services the District provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the financial statements for the relevant year. 61

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76 Financial Trend Information 63

77 Summary of Net Position Last Ten Fiscal Years ASSETS Current and other assets $ 8,895,486 $ 10,258,141 $ 11,263,617 Capital assets, net 24,147,672 23,614,440 27,949,586 Total assets 33,043,158 33,872,581 39,213,203 Deferred outflows of resources Total assets and deferred outflows of resources $ 33,043,158 $ 33,872,581 $ 39,213,203 LIABILITIES AND NET POSITION LIABILITIES Current liabilities $ 2,829,063 $ 2,659,202 $ 3,234,389 Noncurrent liabilities 885, ,358 2,009,656 Total liabilities 3,714,830 3,061,560 5,244,045 Deferred inflow of resources NET POSITION Investment in capital assets 24,147,672 23,614,440 27,949,586 Restricted for capital projects and special transportation - 1,281,412 4,543,842 Unrestricted 5,180,656 5,915,169 1,475,730 Total net position 29,328,328 30,811,021 33,969,158 Total liabilities, deferred inflows of resources and net position $ 33,043,158 $ 33,872,581 $ 39,213,203 64

78 (restated) $ 9,902,524 $ 15,370,036 $ 17,728,733 $ 23,652,119 $ 24,153,129 $ 20,148,979 $ 24,911,083 28,131,954 27,433,790 33,014,713 28,156,242 34,371,636 36,855,141 34,772,770 38,034,478 42,803,826 50,743,446 51,808,361 58,524,765 57,004,120 59,683, ,790 $ 38,034,478 $ 42,803,826 $ 50,743,446 $ 51,808,361 $ 58,524,765 $ 57,004,120 $ 60,468,643 $ 2,822,167 $ 4,840,891 $ 5,355,014 $ 7,938,659 $ 6,078,400 $ 3,717,897 $ 3,488, , ,866 1,153,604 1,523,030 1,904,030 7,826,851 7,451,813 3,568,379 5,654,757 6,508,618 9,461,689 7,982,430 11,544,748 10,940, , ,952 28,131,954 27,433,790 33,014,713 28,156,242 34,371,636 36,855,141 34,772,770 4,727,824 6,058,918 1,699,364 2,178,935 4,928,337 5,055,907 5,957,083 1,606,321 3,656,361 9,520,751 12,011,495 11,242,362 2,872,388 8,291,233 34,466,099 37,149,069 44,234,828 42,346,672 50,542,335 44,783,436 49,021,086 $ 38,034,478 $ 42,803,826 $ 50,743,446 $ 51,808,361 $ 58,524,765 $ 57,004,120 $ 60,468,643 65

79 Schedule of Changes in Net Position Last Ten Fiscal Years OPERATING REVENUES: Passenger fares $ 2,362,414 $ 2,632,514 $ 2,762,266 $ 3,231,769 Accessible services and medicaid Other revenue 603, , , ,791 Total operating revenues 2,966,042 3,128,832 3,557,981 3,854,560 OPERATING EXPENSES: Personnel services 14,126,427 13,586,670 14,524,212 14,351,777 Materials and services 11,686,151 12,083,544 12,769,166 15,770,114 Depreciation 1,504,886 1,644,803 2,512,574 2,459,175 OPEB expense ,933 Total operating expenses 27,317,464 27,315,017 29,805,952 32,987,999 Operating loss (24,351,422) (24,186,185) (26,247,971) (29,133,439) NON-OPERATING REVENUES (EXPENSES): Property taxes 7,743,212 8,314,992 8,566,026 9,076,275 State assistance 3,621,502 4,460,309 5,029,477 6,286,707 Federal assistance 9,273,351 8,674,691 9,488,576 9,173,937 Investment income 152, , , ,844 Insurance Settlement (Loss) gain on disposal of capital assets Total non-operating revenues (expenses) 20,790,422 21,716,563 23,349,938 24,648,763 Net income (loss) before contributions (3,561,000) (2,469,622) (2,898,033) (4,484,676) EXTRAORDINARY ITEMS Loss on capital asset impairment Litigation settlement CAPITAL CONTRIBUTIONS 3,036,356 3,952,315 6,056,170 4,981,617 Change in net position (524,644) 1,482,693 3,158, ,941 NET POSITION, BEGINNING 29,852,972 29,328,328 30,811,021 33,969,158 Cumulative effect of restatement NET POSITION, ENDING $ 29,328,328 $ 30,811,021 $ 33,969,158 $ 34,466,099 66

80 (restated) $ 2,095,166 $ 2,271,146 $ 2,916,951 $ 2,793,604 $ 2,776,575 $ 2,817,514-1,255,467 2,472,645 3,127,234 3,129,220 4,305, , , , , , ,058 2,981,577 4,028,335 5,984,001 6,574,775 6,370,847 7,488,329 15,408,544 15,536,920 15,715,505 16,130,831 13,960,216 16,204,737 15,143,728 13,275,500 14,901,593 16,200,005 18,310,843 20,294,244 2,341,038 2,699,400 3,556,442 2,883,582 3,032,068 3,089, , , , , , ,749 33,300,243 31,851,558 34,542,966 35,595,418 35,684,127 39,808,053 (30,318,666) (27,823,223) (28,558,965) (29,020,643) (29,313,280) (32,319,724) 9,461,631 9,632,849 9,733,903 9,984,733 10,179,017 10,714,350 7,764,506 7,615,152 7,459,771 5,251,979 5,746,114 6,350,961 13,010,303 10,306,319 11,014,530 12,538,020 11,786,100 18,721,493 32,217 44,304 58,336 65,672 53,457 94, , (21,817) 14,000 1,859 8,607 30,268,657 27,598,624 28,244,723 27,854,404 27,766,547 35,912,744 (50,009) (224,599) (314,242) (1,166,239) (1,546,733) 3,593, (4,033,628) ,842, ,732,979 7,310,358 2,459,714 5,519,348 4,691, ,630 2,682,970 7,085,759 (1,888,156) 8,195,663 3,144,994 4,237,650 34,466,099 37,149,069 44,234,828 42,346,672 50,542,335 44,783, (8,903,893) - $ 37,149,069 $ 44,234,828 $ 42,346,672 $ 50,542,335 $ 44,783,436 $ 49,021,086 67

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82 Revenue Capacity Information 69

83 Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal years Fiscal Year Ended Real Property Public June 30 Residential Commercial Other Utilities 2015 $ 9,465,844,664 $ 3,995,343,187 $ 911,072,066 $ 379,053, ,007,573,480 3,846,172, ,365, ,759, ,816,797,730 3,433,678,538 1,279,522, ,029, ,759,048,203 3,339,150,044 1,343,247, ,657, ,600,677,419 3,183,653,070 1,312,362, ,244, ,361,385,216 3,087,730,407 1,289,452, ,454, ,077,158,768 2,918,957,086 1,277,143, ,680, ,684,866,692 2,803,893,266 1,216,667, ,047, ,302,989,213 2,647,888,179 1,144,732, ,671, ,904,738,831 2,502,620,059 1,124,720, ,267,725 Sources: Marion County and Polk County Assessors. Notes: (1) Estimated actual value of taxable property equals real market value except for tax exempt property which is excluded, and farm use property which is included at its lower taxable value. Real market value and assessed value were required to be equal by state law prior to fiscal year In May 1997, voters approved ballot Measure 50 which reduced assessed values to 90% of 1995 real market values and limits the annual increase in assessed values to 3%. 70

84 Total Taxable Total Estimated Personal Assessed Direct Actual Value of Property Value Tax Rate Taxable Property $ 382,966,983 $ 15,134,280, $ 23,163,638, ,792,970 14,540,664, ,031,259, ,105,749 14,289,134, ,722,497, ,494,517 14,201,598, ,696,127, ,944,263 13,927,881, ,584,754, ,774,662 13,560,797, ,200,234, ,216,930 12,989,157, ,664,102, ,161,804 12,414,637, ,610,541, ,400,775 11,741,682, ,737,098, ,286,345 11,172,633, ,733,108,386 71

85 Principal Property Taxpayers Current Fiscal Year and Nine Years Ago Percentage of Percentage of Taxable Total Taxable Taxable Total Taxable Assessed Assessed Assessed Assessed Taxpayer Rank Value Value Rank Value Value Portland General Electric Co 1 $ 126,569, % 1 $ 89,898, % Northwest Natural Gas Co 2 92,097, % 3 73,513, % Lancaster Development Company LLC 3 58,833, % 4 46,529, % CenturyLink (Formerly Qwest) 4 47,886, % 2 77,545, % Donahue Schriber Realty Group 5 51,968, % 0.00% Metropolitan Life Insurance Co 6 45,385, % 5 34,365, % Comcast Corporation 7 39,818, % 15,951, % State Investments LLC 8 38,153, % 13,811, % Wal-Mart Real Estate Business Tr 9 33,706, % 6 26,835, % HD Salem OR Landlord LLC 10 33,954, % State Accident Insurance Fund 7 24,090, % Lowe's HIW Inc 8 23,413, % PPG Industries Inc 9 22,010, % Price-ASG LLC 10 19,042, % Total for principal taxpayers 568,372, % 467,008, % Total taxable assessed value $ 14,289,134,415 $ 11,172,633,508 Sources: Marion County and Polk County Assessors. 72

86 Property Tax Levies and Collections Last Ten Fiscal Years Fiscal Collected within the Year Total Tax Fiscal Year of the Levy Collections in Total Collections to Date Ended Levy for Amount Percentage Subsequent Amount Percentage June 30 Fiscal Year Collected of Levy Years Collected of Levy 2015 $ 10,882,259 $ 10,279, % $ - $ 10,279, % ,472,555 9,853, % 174,831 10,028, % ,233,065 9,570, % 261,042 9,831, % ,084,413 9,412, % 310,086 9,722, % ,899,957 9,218, % 325,429 9,543, % ,648,987 8,976, % 367,844 9,344, % ,308,022 8,651, % 393,022 9,044, % ,920,000 8,353, % 311,415 8,664, % ,464,291 7,999, % 255,638 8,255, % ,969,446 7,505, % 242,290 7,747, % Sources: Marion County Assessor and Polk County Treasurer 73

87 Demographic and Economic Information 74

88 Demographic and Economic Statistics Last Ten Fiscal Years Per Capita Personal Year Population (1) Personal Income (1) Income (1) Unemployment Rate ,643 $ 11,614,203 $ 35, % ,150 11,484,654 35, % ,880 11,249,451 35, % ,985 11,249,451 35, % ,150 10,790,917 33, % ,335 10,371,061 32, % ,170 10,453,957 32, % ,865 10,374,739 33, % ,070 9,901,895 31, % ,665 9,458,541 30, % Personal Income in thousands (1) This schedule is for the Marion County area and is provided as reference only. The District operates in both Marion and Polk Counties, however more operations occur in Marion than Polk County. Polk County information was not available for all years. Sources: Oregon Employment Department - Worksource Oregon Marion County - Oregon Demographics US Department of Commerce, Bureau of Economic Analysis US Census Bureau US Bureau of Labor Statistics, Local Area Unemployment Statistics Population Research Center, Portland State University 75

89 Salem Metropolitan Area Employers - Largest to Smallest Current Year and Nine Years Ago FY 2015 FY 2006 Employer Employees % of Total Employees % of Total Government 41, % 39, % Trade, transportation, and utilities 24, % 25, % Educational and health services 24, % 18, % Leisure and hospitality 13, % 12, % Professional and business services 13, % 13, % Manufacturing 12, % 15, % Construction 8, % 8, % Financial activities 7, % 7, % Other services 5, % 5, % Mining and logging 1, % 1, % Information 1, % 1, % Total Salem Metropolitan Area Non-Farm Payroll Employment 152, % 148, % Source: Oregon Employment Department Salem Area MSA Nonfarm Employment annual reports using only the months that coincide with District's fiscal year. 76

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91 Operating Information 78

92 District Employees by Division Last Ten Fiscal Years Division General Administrative General Manager Finance Human Resources Information Systems Operations Administration Security Fixed Route Operations - Non-Bargaining Fixed Route Operations - Bargaining Vehicle Maintenance - Non-Bargaining Vehicle Maintenance - Bargaining Facilities Maintenance - Non-Bargaining Facilities Maintenance - Bargaining Transportation Development Transportation Development Rideshare Program Community Relations Customer Service Marketing Director Total FTE Per Budget

93 Operating Revenue and Cost Measurements Last Ten Fiscal Years Fixed Route System Fiscal Year Fare Revenue Operating Expense Revenue Margin Annual Vehicle Miles Annual Revenue Miles Unlinked Passenger Trips (UPT) 2006 $ 2,044,104 $ 18,013, % 2,808,326 2,593,144 5,551, ,286,289 17,104, % 2,430,139 2,235,947 5,125, ,762,266 17,707, % 2,329,787 2,150,744 5,047, ,231,769 17,349, % 2,192,433 2,009,115 4,746, ,095,166 17,904, % 2,171,446 2,019,554 4,272, ,156,084 18,481, % 2,131,035 1,990,530 4,203, ,487,342 18,582, % 2,089,966 1,951,757 3,363, ,358,925 19,555, % 2,117,115 1,982,591 3,413, ,363,360 20,331, % 2,125,959 2,001,989 3,322, ,623,816 20,751, % 2,191,929 2,059,524 3,371,517 Demand Response Fiscal Year Fare Revenue Operating Expense Revenue Margin Annual Vehicle Miles Annual Revenue Miles Unlinked Passenger Trips (UPT) 2006 $ 360,920 $ 4,426, % 1,358,527 1,157, , ^ 372,961 9,148, % 2,410,478 2,110, , ,634 9,459, % 3,605,490 3,169, , ,694 11,567, % 4,314,455 3,467, , ,909 11,044, % 3,998,375 3,485, , ,598 12,975, % 3,838,149 3,724, , ,961 11,527, % 4,789,771 4,789, , ,154 12,865, % 4,530,236 4,182, , ,101 13,710, % 4,750,911 4,382, , ,675 16,771, % 7,871,544 7,482, ,184 Vanpool Fiscal Year Fare Revenue Operating Expense Revenue Margin Annual Vehicle Miles Annual Revenue Miles Unlinked Passenger Trips (UPT) 2006 $ 17,346 $ 233, % 122, ,877 22, , , % 157, ,586 25, , % 120, ,258 23, , , % 186, ,407 34, , , % 223, ,173 38, , , % 246, ,546 42, , , % 343, ,211 55, , , % 399, ,775 66, , , % 499, ,454 79, , , % 613, ,454 79,084 ^ In FY 2007 the District began receiving the funds and paying contractors for the services they provided rather than the contractor receiving the funds directly. * Information was not available at time of report issuance. 80

94 Annual Vehicle Revenue Fixed Route System Operating Expense per Passenger Fiscal Year Annual Passenger Miles Hours Operating Expense per Mile Operating Expense per Revenue Mile Operating Expense per UPT Mile ,270, ,375 $ 6.41 $ 6.95 $ 3.24 $ ,338, , ,968, , ,643, , ,974, , ,620, , ,896, , ,060, , ,695, , ,867, , Fiscal Year Annual Passenger Miles Annual Vehicle Revenue Hours Demand Response Operating Expense per Mile Operating Expense per Revenue Mile Operating Expense per UPT Operating Expense per Passenger Mile ,157,971 85,763 $ 3.26 $ 3.82 $ $ ^ 3,274, , ,008, , ,124, , ,449, , ,202, , ,340, , ,534, , ,626, , ,801, , Fiscal Year Annual Passenger Miles Annual Vehicle Revenue Hours Vanpool Operating Expense per Mile Operating Expense per Revenue Mile Operating Expense per UPT Operating Expense per Passenger Mile ,113,153 2,913 $ 1.90 $ 1.90 $ $ ,166,256 3, ,191 3, ,296,409 4, ,457,047 4, ,645,638 5, ,060,457 7, ,611,080 8, ,841,022 11, ,864,484 11,

95 Disclosures and Comments Required by State Minimum Standards 82

96 475 Cottage Street NE, Suite 200, Salem, Oregon (503) INDEPENDENT AUDITOR S REPORT REQUIRED BY OREGON STATE REGULATIONS Board of Directors Salem Area Mass District Salem, Oregon We have audited, in accordance with auditing standards generally accepted in the United States of America, the basic financial statements of (the District) as of and for the year ended June 30, 2015, and have issued our report thereon dated January 20, Compliance As part of obtaining reasonable assurance about whether the District s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants, including the provisions of Oregon Revised Statutes as specified in Oregon Administrative Rules through of the Minimum Standards for Audits of Oregon Municipal Corporations, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. We performed procedures to the extent we considered necessary to address the required comments and disclosures which included, but were not limited to the following: Deposit of public funds with financial institutions (ORS Chapter 295). Budgets legally required (ORS Chapter 294). Insurance and fidelity bonds in force or required by law. Programs funded from outside sources. Authorized investment of surplus funds (ORS Chapter 294). Public contracts and purchasing (ORS Chapters 279A, 279B, 279C). In connection with our testing nothing came to our attention that caused us to believe the District was not in substantial compliance with certain provisions of laws, regulations, contracts, and grants, including the provisions of Oregon Revised Statutes as specified in Oregon Administrative Rules through of the Minimum Standards for Audits of Oregon Municipal Corporations except the District had expenditures in excess of appropriations as detailed in the notes to the financial statements. 83

97 Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the District s internal control over financial reporting to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District s internal control. Accordingly, we do not express an opinion on the effectiveness of the District s internal control. Restriction on Use This report is intended solely for the information and use of the board of directors and management of the District and the Oregon Secretary of State and is not intended to be and should not be used by anyone other than these parties. GROVE, MUELLER & SWANK, P.C. CERTIFIED PUBLIC ACCOUNTANTS By: Ryan T. Pasquarella, A Shareholder January 20,

98 SALEM AREA MASS TRANSIT DISTRICT Federal Compliance Report For the year ended June 30, 2015 Marion County, Oregon

99 475 Cottage Street NE, Suite 200, Salem, Oregon (503) INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Directors Salem, Oregon We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of (the District) as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the District s basic financial statements, and have issued our report thereon dated January 20, Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the District s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District s internal control. Accordingly, we do not express an opinion on the effectiveness of the District s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the District s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the District s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 1

100 Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. CERTIFIED PUBLIC ACCOUNTANTS January 20,

101 475 Cottage Street NE, Suite 200, Salem, Oregon (503) INDEPENDENT AUDITOR S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 Board of Directors Salem, Oregon Report on Compliance for Each Major Federal Program We have audited s (the District) compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the District s major federal programs for the year ended June 30, The District s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of the District s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the District s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the District s compliance. Opinion on Each Major Federal Program In our opinion, the District complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, Report on Internal Control Over Compliance Management of the District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of 3